After years of giving out mortgages to millions of people with less-than-stellar credit histories, lenders were imploding as subprime borrowers defaulted on their loans. The contagion spread quickly to Wall Street, which had packaged those risky loans and sold the securities to big investors in the United States and around the world.

With business decisions like giving hundreds of thousands of dollars to people who could and/or would not pay it back things were going to get bad. Packaging these loans up and selling them as great investments was bound to eventually become a problem - people who knew what was going on saw that the system was flawed. Many people viewed themselves as just cogs in the massive Housing Bubble machine. Now they try to claim they only understood their part and did not or could not see the big picture. Starting with the fed -

At the Fed, Bernanke has been working to expand the agency's role in monitoring how Wall Street bundles mortgages. The central bank is closely studying a wider range of financial institutions than ever before. Meanwhile, the Fed has so far this year provided $435 billion in short-term loans to squeezed banks.

Some economists have said that the Fed played a role in creating the problem. "The U.S. was too ambitious in trying to prop up growth in the early 2000s through low interest rates, through aggressive fiscal policy, in ways that weren't sustainable," said Kenneth Rogoff of Harvard University, a former chief economist for the International Monetary Fund. "It exacerbated these risks down the road."

Alan Greenspan, who was famously opaque while presiding over the Fed during the bubble, bluntly defends his tenure. "The prevailing notion is that the bubble is indigenous to the United States, is caused by Federal Reserve policy and if the people at the Federal Reserve, especially the chairman, were sensible, this thing would not have happened," Greenspan said in an interview. "History is being rewritten, and I will tell you this is not the history that I remember."

The people who had access to the big picture apparently were looking elsewhere - still are. The spiral got so big, with flaws throughout the system. Loans to people who could not pay. Derivatives to unheard of numbers. Top ratings to junk loans and bonds. The entire system was broken - but made many people rich, very rich so many did not care to ask the hows and the whys. Notice that the story of the various regulators and their roles were not in the article? The Fed is illustrated more as a reactive force trying to stop implosions and prevent a global economic meltdown. Was there no one who could have been a proactive force? Were Keith from Housing Panic and Grim from NJ Real Estate Report the only few (besides Edward Gramlich) ringing the alarms?

And this is what is happening currently -

Some of the nation's biggest banks have lost billions of dollars and have booted out their top executives. Some forecasters predict that 3 million more homes could go into foreclosure in coming years. The housing problems are often concentrated in low-income, high-immigration neighborhoods in places such as Prince William County, where there were 3,344 foreclosures last year, up from 282 in 2006 and 52 in 2005, county records show.

Meanwhile Washington is fighting about how to clean up the housing mess. A mess that will affect all of us - whether we were involved in the housing boom or not.